19. We have considered the rival submissions and perused the material on record. In our considered view inferences drawn by the authorities below are not sustainable in law. The grounds on which the A.O. has added the amount of gift as assessee’s income are summarized by us in para 12. We do not agree that the persons showing income of Rs.80,000 to Rs. 1,50,000 per annum would be persons of no means or low means. These donors are clearly identifiable and they are assessed to tax. They had appeared before the A.O. and given their statements to the A.O. Therefore, there cannot be any doubt about their identity. Regarding the capacity of the donors, we hold that the inference of the A.O. about the income of Rs.80,000 to Rs. 1,80,000 shown by these donors in their return of income is not adequate to hold that they are man of means is not acceptable. They are persons of reasonable means though not earning income in higher category, say Rs.5 lakhs or Rs.10 lakhs or more. They have owned the bank a/c from which alleged gift was given and also owned the money deposited in their bank account. During the course of assessment proceedings or appeal proceedings, no question was asked from the donors as to from where they have got cash for depositing in their bank account. Even the assessment of the donors was not reopened for the alleged owning of cash for depositing in bank account for giving gift to the assessee. So far as genuineness of the gifts is concerned, we notice that the AO has not brought out in the statement recorded of the donors that there was no semblance of natural love and affection. On the other hand, some of them had claimed that they are close relatives of the assessee and because of their personal bondages, they had given gift to the assessee. All these donors had filed affidavits , the contents thereof were not controverted by the A.O.

24. In our considered view, though the onus for proving the gifts as genuine is on the assessee but this onus is not fixed. It goes on shifting from assessee to revenue and then from revenue to assessee depending upon evidences furnished by the parties. In the case of ACIT vs Smt. MeeraDevi (2007) 14 SOT 190 (Alld) , the I TAT bench held that an outright rejection of the explanation by the A.O. would not be justified unless there is material on record to show that the explanation was not satisfactory. In this regard , we refer to head notes from that decision as under:

“Under section 68, there is no doubt that initial onus lies on the assessee to establish the identity of the creditors and their creditworthiness and genuineness of the transaction. But this onus is not fixed. It is vacillating. It would shift to the A.O., if the assessee has produced evidence which reasonably explains his case. Onus will again shift to the assessee if, on the basis of material on record, the A.O. finds the explanation not convincing. In the instant case, the A.O. had issued commission to another officer, who himself summoned the creditors and recorded their statements, who admitted to have advanced the money to the assessee by borrowing loans from the market. The A.O. had initiated proceedings under section 148 against the creditors. In those proceedings, necessary evidences of loan raised by the creditors were filed. But the A.O. did not issue any summon or collect any material on his own from the creditors of the creditors so as to show that the claim of the loan made by the two lady creditors was false or not satisfactory. An outright rejection of an explanation was not a quasi-judicial act. There was no material with the AO to come to the conclusion that the creditors had not raised the loans from the market or that story put forward by them was fake. On the other hand, the assessee was a 24 years old lady, who had just entered into the business. It was not expected that she would have unaccounted money, which would go to creditors and siphoned back to the assessee in the form of loan.

The word ‘may’ used in section 68 provides discretion to the A.O. In general the word ‘may’ is an auxiliary verb clarifying the meaning of another verb of expressing an ability, contingency, possibility or probability. When used in a statute in its ordinary sense , the word is permissive and not mandatory. But where certain conditions are provided in the statute and on the fulfillment thereof, a duty is cast on the authority concerned to take an action, then on fulfillment of those conditions the word ‘may’ takes the character of ‘shall’ and then it becomes mandatory. But in section 68, there are no such conditions on the fulfillment of which the AO is duty bound to make the addition. In sections 68 and 69, the word ‘may’ used is only discretionary. Thus, in the instant case, the done anything or collected any material to shift back the onus to the assessee.

The assessee had discharged initial onus by showing that the two creditors had borrowed the loans from the market and gave loans to her. The A.O. had not been able to find out any error in that explanation so as to hold it unsatisfactory. If the two creditors were not able to give any satisfactory explanation about the loans raised by them, the same could be considered in their hands under section 68 which had actually been considered by making additions in their assessments.

Therefore, the assessee had discharged her initial onus and there was no material on record collected by the AO to shift back the onus to the assessee. The explanation offered by the assessee that she had raised loans from the two creditors, who had admitted to have given the loans by raising loam, in turn, was satisfactory and, hence, no addition u/s 68 was called for in the hands of the assessee. “

25. In the present case the assessee has initially discharged the onus by producing the donors before the A.O. before whom they have confirmed to have given gifts and proved that they had source of income and that some of them are related to the assessee. The assessee discharged the onus which now shifted to the A.O. who is supposed now to find out that the explanation given by the assessee is not satisfactory. There is no material on record to suggest that the explanation furnished by the assessee is not satisfactory. Whatever inferences the A.O. has drawn cannot be sustained unless the authorities give a finding that the donors could not have cash at their own and could not have deposited the same out of their own sources and further that the theory of love and affection is only a smoke screen for arranging the gifts. Once the donors are related to the assessee and there is a day-to-day acquitance with the assessee, as in the present case, unless it is shown that it is only a pretence and not a natural phenomenon , the existence of ingredients of love and affection cannot be ruled out. Love and affection can be reflected by frequent acquaintance , mutual exchanges of gifts, mutual help to each other standing for each other in hours of need, and other similar factors. Once the assessee has shown that the donors are related to him and they are closed family friends, then the onus shifted on the A.O. to show that what is pretended to be a case of natural love and affection is not borne out from facts. Such facts are required to be extracted by the A.O. either by enquiries or by recording statements of donors/donee/ other witness or by whatever means lawful, he considers necessary. Rejecting the claim of natural love and affection which is otherwise apparent as in the present case without there being any material on record would not be justified. The assessee is not expected to bring material and evidence by foreseeing as to what would satisfy the A.O. He is expected to produce evidence which any normal prudent and intelligent person is required under law to produce. If prima facie evidence produced by the assessee are acceptable , then the onus shifted to the A.O. to rebut them and give a finding based on material and legal inferences, that explanation of the assessee is not satisfactory.